Out of bankruptcy, a steal for taxpayers

When SANDAG, the regional planning agency, began last fall to explore a takeover of the bankrupt South Bay Expressway, the questions were many. The fact that the following months of study and negotiation were conducted largely out of public view did not add to public confidence that a deal to buy the toll road would be a good deal for taxpayers.

The questions lingered even as the operator emerged from bankruptcy in April and SANDAG put an undisclosed offer on the table to buy the 10-mile highway that was conceived in 1991 and finally opened in 2007, at a cost of $635 million, but which never came close to attracting the number of toll-paying cars and trucks that had been projected.

The central questions were these: Why would SANDAG pay hundreds of millions of dollars to buy a highway that would revert to public ownership for free anyway in some 30 years? Were there no other private-sector bidders willing to try to make a go of it? How would SANDAG finance it? And, would any other projects be delayed or scuttled to pay for it?

Late last month, the SANDAG board approved a tentative deal to buy the road for $345 million. A special hearing is set for Aug. 26 to discuss financing alternatives and related matters and the deal could close 60-90 days after that. Some of the answers to those key questions are finally beginning to emerge.

Jerome Stocks, chairman of the SANDAG board, says the agency may only have to come up with about $245 million of the purchase price because the remaining $100 million or so is owed to the federal government and, he says, the Department of Transportation does not want to give up its ownership stake. In addition, purchase of the road would likely obviate the need to add four express lanes to Interstate 805 south of SR-54, scheduled for around 2030 and estimated to cost nearly $700 million, making more money available for other regional projects.

There were indeed private companies interested in the road, Stocks acknowledged, but he said he did not know if any actually submitted an offer. He added that it would have been difficult to compete with SANDAG’s bid. As a government agency, SANDAG would have no multimillion-dollar property tax bill to cover, it already has the employees to operate the toll road, and SANDAG would be looking only to maximize the movement of people and goods, while a private operator would be looking to maximize profit. All of that means SANDAG can almost certainly lower the tolls more significantly than a private operator could.

Questions remain. But as the facts emerge, they make a compelling case that doing this deal is, as Stocks said, “way smarter” than not doing this deal.